I always knew Malcolm would have his work cut out for him. I just had no idea things in Canberra were this bad.
I’m guessing I’m not the only one who’s been a tad disappointed with Malcolm.
I did have high hopes. I probably should have known better.
My hope was based on two things. First, I found the change in tone (no pun intended) a relief. I saw Malcolm as a mindset Prime Minister. He immediately got out on the front foot and said we needed to stop living like scaredy cats, worried about future-proofing ourselves – protecting ourselves from the world.
Rather, we needed to get out there and embrace the future and the opportunities it presented.
This aligned with my own view of how to succeed in life. It’s not by hiding from threats, but by actively seeking out opportunities. The future is coming whether you like it or not. You can’t protect yourself from it. But there are always opportunities, for those brave enough to seek them out.
It was a message of hope and something I thought might rally Australians together. It was certainly a welcome change from the ad hoc mix of fear and bluster that Malcolm replaced.
So I thought that Malcolm got it. I think he still does. But we don’t have much to show for it. There’s a glossy PR campaign around our “Innovation Agenda”, but then CSIRO was gutted and mining research got more funding.
Way to future, Canberra.
And I think that reflects the second hope I saw dashed. Part of me hoped that maybe Malcolm could save us from Canberra. Politics is a cess-pool of vested interests and corporate lobbyists, with a twist of religious extremism.
Malcolm was a man from the outside. He knew how to lead. He knew how to bring people together. He knew how to get stuff done.
Malcolm looked like the man to fix it. It was Malcolm’s moment.
But Malcolm’s not winning. Whether it’s the nut jobs in his own party or big-money interests, Malcolm seems to be floundering.
It seems things in Canberra are worse than we thought.
That’s disappointing. If I wasn’t such a half-full kinda guy, I’d even say it’s a bit depressing.
Anyway, I’m sticking by Malcolm. Maybe he’ll pick up his game in the second half. But you’re on notice Malc.
Anyway, I’m thinking about this because Saul Eslake – one of the country’s most famous economists – dug up some stuff Turnbull said about negative gearing a decade ago.
Since Labor went on the offensive over negative gearing, Malcolm has dug in his heels and said that it should stay.
In a recent interview with the ABC, he called it “income tax 101”, going on to say that it is “a fundamental principle of tax law and has been forever that you can deduct from your income the interest expense of money that is borrowed to purchase an income-producing asset”.
But apparently Malcolm wasn’t always such a fan. Well, more’s the point, he saw the nuances involved.
Eslake dug up a speech by Turnbull from 2005 in which he described negative gearing as a form of ‘tax avoidance’, one of the few open to PAYE and other ‘unincorporated’ taxpayers.
Turnbull drew a distinction between the way negative gearing works for companies and for individuals. Companies don’t get the 50 per cent tax discount on capital gains which individuals have done since 1999.
This is how the tax dodge works. Lose money on rents and pay less tax in the short term, make it back up through capital gains discounts in the longer term.
I doubt most mum and dad investors are using it this way, but the popularity of negative gearing with richer folks means it probably is a feature. Malcolm has probably used it that way.
In another 2005 paper, co-authored with the ANU’s Jeromey Temple, Turnbull also argued that “the concessionary taxation of capital gains encourages people to invest in a manner which turns income into capital and, as in the case of negative gearing, allows them to deduct losses at, say, 48.5 per cent and then realise gains and pay tax at effectively half that rate”.
They also went on to say that “Australia’s rules on negative gearing are very generous compared to many other countries”, noting that “the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”.
And they cited former RBA governor, Ian Macfarlane and other commentators as claiming “this divergence in the taxation of income and capital coupled with negative gearing has contributed to the asset bubble in residential real estate”.
Prime Ministers have no such luxury.
But so what, Saul. That was ten years ago. Things change, opinions change.
Or they don’t. And maybe people just wake up to the political realities.
This is what the Malcolm mess is showing us. The Prime Minister is not a free man or woman. They are beholden to the party (probably not a bad thing) and captured by lobbyists and big money (definitely a bad thing).
What Malcolm believed 10 years ago, or believes now, is kind of irrelevant.
You’ve got to work with what you’ve got. And Malcolm certainly has his hands full.
Economists getting all snooty is the last thing he needs.
Feeling disappointed by the Malc? Sticking by him?